By Meghan Hall
The Oakland office market is coming into its own as an urban alternative to the high-tech, space constrained markets of San Francisco and Silicon Valley. Many companies, from city institutions to blooming start-ups, are looking to the East Bay for more affordable rates and room to grow. Amid increasing demand by both tenants and investors, the County of Alameda’s largest property, the Eastmont Town Center, is now being brought to market. The offering, which includes the 550,426 square feet of office space on a 16.5-acre parcel, is located at 7200 Bancroft Avenue.
Guidance pricing for the property was not immediately available. The property is owned by Vertical Ventures.
The Eastmont Town Center was originally built as a mall between 1965 and 1972, and was later converted into office uses in 1997. Additional renovations occurred in 2009. The center and the adjacent, 116,000 square foot retail center were split into separately owned properties in 2015, and the retail portion is not included in the offering.
Since 2015, about $5 million has been invested by Vertical Ventures in the property. The firm originally purchased the property four years ago four $54 million from Portland-based SKB, according to public property documents. The property is being offered at a 70 percent discount to replacement cost.
Today, the center is home to numerous city agencies; in all, 523,670 square feet, or about 87 percent of the center is leased. The County of Alameda, who is the center’s anchor tenant and has AAA credit according to an offering document obtained by The Registry occupies 41 percent, or 213,239 square feet, of the property. The center operated by the Workforce and Benefit Administration in an effort to provide job training workshops, placement assistance, and post-employment support. Two City of Oakland agencies: the Oakland Police Department (OPD) and the Oakland Public Library, occupy another 14 percent of the space. The OPD’s 64,000 square feet includes a police station, forensic and back-up detention facilities, while the public library is a 9,200 square foot public amenity.
Other credit tenants include the Alameda Health System, GSA and Quest Diagnostics. Non-credit tenants make up the remaining 23 percent of the space. No more than 19 percent of leases are expected to roll in any given year, providing stable cash flow for a future investor.
Located in the Oakland Airport submarket, the property is well-poised for future growth. The submarket has a vacancy rate of just 4.9 percent, one of the lowest vacancy rates across all Oakland submarkets. Currently, there are only five properties more than 50,000 square feet in the Oakland Airport submarket, and there are no available properties that could accommodate demand from the Eastmont Center’s targeted tenant base, states the offering document.
The center is centrally located and easily accessible via nine different bus lines. Numerous retailers and eateries, from Carter Community Café, Royal Food Super Market, Egg Roll Kitchen and Lena’s Soul Food are also located near the property.
Jack London Square has a vacancy rate of about seven percent, while Oakland’s Central Business District has a vacancy rate of just about 11 percent. The overall vacancy rate in Oakland currently sits at just over 10 percent.
The vacancy rate is expected to compress even further as record levels of demand, but limited new supply in both San Francisco and Oakland, are pushing cost conscious businesses further East. According to Newmark Knight Frank, the Oakland Airport submarket has been the primary beneficiary of tenants displaced by tighter markets. Office demand is also expected to increase as hundreds of new residential units come online throughout the city.
Compared with San Francisco, where asking rents are more than $7 per square foot, rates in the Oakland Airport market are just over $2, almost two thirds less than San Francisco. The Downtown Oakland submarket sits in the middle, with asking rates of approximately $5 per square foot.